SaaS CRM Software Total Cost of Ownership (TCO)
SaaS CRM software out of pocket investment is typically limited to the subscription fee. This CRM pricing model provides a predictable investment which is simple to budget and easily managed. However, some non-hosted organization's have attempted to raise FUD (fear, uncertainty and doubt) and alleged higher total cost of ownership (TCO) when comparing hosted solutions to non-hosted solutions. To bring an unbiased perspective, we reference an independent analyst and leading CRM software blog.

At an IDT conference in San Francisco, Analyst Sheryl Kingstone of the Yankee Group convincingly illustrated that hosted solutions continue to show lower TCO over a five year period and publicly distributed the below Yankee group figures. Contact the Yankee Group for more detailed information.

We highly recommend preparing your own Total Cost of Ownership analysis if you are trying to evaluate the relative costs of hosted and non-hosted solutions.

Another Comparison Point

Another comparison scenario produced the below cost of ownership analysis for hosted and non-hosted CRM applications.

On-Premise Assumptions:

Number of users

35

On-premise per user software cost

$795

Annual software maintenance

22% of software cost

Cost of server(s) for on-premise software

$9,000

Annual hardware maintenance cost

12%

Fully loaded cost of IT resource for support

$90,000

Allocation of FTE to support software (Ops/DBA/support)

25%

Cost of firewall

$2,500

Cost of UPS

$1,200

Cost of operating system and RDBMS

$6,500

Hosted Assumption:

Hosted cost per user per month

$70

Cost Component

Rationale

Year 1

Year 2

Year 3

Year 4

Year 5

Total

On-premise software

With an On-Premise License you buy the version that is current at the time and begin using it. As major functional enhancements are made, new versions will be released. Updates to the version you purchase are typically included under the maintenance plan. Releases of new versions are rarely covered as part of the maintenance plan. Check with the vendor during negotiations.

9,275

9,275

9,275

27,825

On-premise annual maintenance plan

On-Premise Provides a variety of support / maintenance options. Typically these agreements are annual and expressed as a % of the original license fee.

2,041

2,041

2,041

2,041

2,041

10,203

Primary server - depreciation charge

On-Premise Requires a central computer/server to store customer data. The same server runs both On-Premise For the Web (as a web server) and the database that serves normal On-Premise users while in the office. The server can be quite basic, but needs to have data backup capability and sufficient processing to handle the predicted number of user accounts. This price assumes a single processor with 2 MB memory; 100GB hard drive; network card; remote management card; RAID level 3 drive capable. The cost is calculated based on three year straight line depreciation.

3,000

3,000

3,000

9,000

Primary server - hardware support contract

The hardware manufacturer will charge an annual fee to provide support for the server that includes on site service calls with guaranteed response times and replacement of failed or defective parts. These are generally priced at a % of the hardware cost annually.

1,080

1,080

1,080

1,080

1,080

5,400

Backup server - depreciation charge

This server is a hot backup that can support your system if the primary system fails. It is a duplicate of the primary server. This provides the equivalent redundancy that will be provided by a hosted vendor.

3,000

3,000

3,000

9,000

Software for primary and backup servers

This is the cost for the operating system software and relational database application to run the software. Most enterprise solutions will use Oracle or MS SQL as their database. The cost is double as the same software is required on the back up server. The software is depreciated over three years.

4,333

4,333

4,333

13,000

Backup server hardware support contract

The hardware manufacturer will charge an annual fee to provide support for the server that includes on site service calls with guaranteed response times and replacement of failed or defective parts. These are generally priced at % of the hardware cost annually.

1,080

1,080

1,080

1,080

1,080

3,240

Network firewall/router - expensed asset

To secure your On-Premise data from unauthorized access and to isolate the On-Premise system from the rest of your internal systems and network, you will need a firewall/router that keeps On-Premise separate.

2,500

2,500

Backup power supply - expenses asset

To avoid system crashes, which can cause major disruption to the On-Premise Database, you need to maintain constant power. This is for a uninterruptible power supply system that can run On-Premise Servers for two hours. Price also includes remote management cards to enable monitoring and remote management of the UPS.

1,200

1,200

Installation IT support

Assume 50% during initial set up period of 3 months. Installing the On-Premise software is relatively simple; however, building the server and the network connectivity will require a dedicated IT professional for 3 weeks.

11,250

11,250

Ongoing IT support

Owning your servers requires that you have an IT support professional to monitor and manage your servers. Duties include applying patches to the operating system and applications; restarting services as needed when they fail; managing backup of data files; assuring adequate disk space; etc. Assume 8 hours per week for support of the two On-Premise for the Web servers and related software and hardware.